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Disappointing Off-Payroll review “reeks of denial” by the Treasury

HM Treasury has published its review of the private sector Off-Payroll Tax plans, which it reiterates will go ahead in April 2020, despite an industry backlash and strong calls for its abolition.

The review offers little in the way of new announcements, and largely serves to reaffirm Government’s intentions and reasons for implementing the changes, as ContractorCalculator CEO Dave Chaplin observes:

“It’s hard to gather exactly what the Treasury’s supposed review of the Off-Payroll Tax consisted of, and what feedback was taken on board, because the report simply confirms once more that Government intends to press ahead with the plans that we know have been staunchly opposed by those providing representations.

New publication, same old Off-Payroll rhetoric

“This review reeks of denial,” continues Chaplin. “The report is littered with the same old rhetoric that Government has been spouting throughout the consultation phase, much of which has been rebutted time and again by the contract sector.”

The rhetoric that Chaplin refers to is evident throughout the report. One such example is the Treasury’s repeated insistence that the Off-Payroll Tax ‘does not introduce a new tax liability’, despite the fact that the legislation deems fee-payers liable for employment tax costs at a marginal rate of 14.3%.

In detailing its intentions for the private sector, the Treasury noted:

  • Off-Payroll Tax private sector implementation to go ahead in April 2020
  • No penalties for compliance errors will be applied during the first year, except in cases of deliberate non-compliance
  • HMRC reaffirms promise not to use information gathered to investigate historical limited company engagements, unless it suspects fraud

“Though HMRC and the Treasury have offered assurances, the caveats in place concerning suspicion of ‘deliberate non-compliance’ and ‘fraud’ mean clients, agencies and contractors can take little comfort in these announcements,” notes Chaplin.

Pressing Off-Payroll issues ignored by Government

Elsewhere, the Treasury has failed to provide any solutions to pressing issues regarding the Off-Payroll Tax. In reference to the issue of blanket assessments conducted by non-compliant clients, raised by many industry stakeholders, the report simply states: ‘The Government has been clear that determinations need to be made on a case-by-case basis’.

Meanwhile, the Treasury claims that ‘independent research on the impacts of the reform in the public sector showed that it did not reduce market flexibility or impact use of contingent labour’. However, the review fails to refer to any particular study.

Using tax receipt to assess the impact of the public sector changes, the review concludes that ‘compliance with the rules is improving’. This approach was recently criticised by experts at a Finance Bill Sub-Committee hearing, several of whom alluded to the impact that blanket assessments have had on payroll tax receipts.

“Jean-Baptiste Colbert famously said: ‘The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least amount of hissing’,” notes Chaplin. “This Government seems intent on rewriting the rulebook by defeathering the goose with one quick yank. I hope it’s braced for the inevitable fallout.”

Published: 27 February 2020

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